The Jamaica Gasolene Retailers Association (JGRA) is welcoming the regulatory framework which is being proposed by the Petrojam Review Committee (PRC) to create transparency in the refinery’s pricing mechanism, and provide oversight for the trade.

President of the JGRA, Gregory Chung noted that while the trade had moved from being regulated to being deregulated, going back to that regime might be necessary given the current situation in the industry.

“It’s like we are going back. But we do see the need for regulation because we have a lot of marketers that are importing and they are also retailing, and also looking at hauling the fuel. So you have some of them looking at full vertical integration and that has created some very difficult situations for our members in areas where these guys are just retailers,” Chung explained.

He said that while retailers had exclusive supply contracts with marketing companies, marketers which are importing, hauling and retailing had a distinct price advantage. “And sometimes they use that to the detriment of our members. While competition is good, for some of our members it’s not like they can switch,” he remarked.

“There are a lot of issues out there…we await the details of this regulatory framework. There are a lot of challenges for our members with this kind of set-up that’s going on right now,” Chung said.

The PRC has proposed that regulations should include a base price at the terminal rack but restricts or eliminates the use of other adjustments, which must be approved by the regulator.

“We have asked Petrojam to explain their pricing formula several times and to a high degree they told us the cost of crude, the US exchange rate and various costs. But there is this part that says ‘discretionary adjustment’, and this is the area we are concerned with because we have seen situations where on the world market the price of oil is going down but the price is going up here.

“Sometimes it’s the other way around, where prices are going up and we are going down, so we want to know in a transparent way how the price comes about. I think this is where the committee is targeting — in that regard this would be good, because Petrojam is not the only importer, although they’re the biggest distributor. There are smaller importers of fuel in Jamaica that are wholesaling the gas cheaper,” Chung said.

On Thursday at a press conference called by Prime Minister Andrew Holness at Jamaica House, the PRC outlined a raft of recommendations which it has put to Cabinet in an extensive report, coming out of its findings at the refinery. Holness established the committee last September after contriversy hit the facility.

Meanwhile, Chung said the JGRA also welcomed the proposal from the PRC to divest Petrojam, but said that it would be preferable for the Government to take an approach similar to the arrangements for the privatisation of Wigton Windfarm Limited.

In April the Government announced that it was giving Jamaicans the opportunity to purchase shares in Wigton, with an initial public offering of 11 billion shares. The aim was to raise $5.5 billion from the sale. Wigton is a subsidiary of Petroleum Corporation of Jamaica (PCJ), which is also the parent company for Petrojam.

The PRC has recommended that the Government take Petrojam off its hands under a long-term lease arrangement.

“We are happy with that because that would isolate Petrojam from any political decision-making… However, we would want it to remain Jamaican, and maybe even look at a broad-based ownership similar to what happened with Wigton,” Chung stated.

Furthermore, he said the JGRA would want such ownership to be independent of industry stakeholders, such as marketers.